The war in the Middle East caused a marked acceleration in the rate of input cost inflation in the Vietnamese manufacturing sector during March, with selling prices subsequently raised at the fastest pace in almost 15 years, according to a report released by S&P Global on April 1.

Intensifying price pressures acted to limit demand, and rates of growth in both new orders and output slowed as a result. In turn, employment and purchasing activity were scaled back. Meanwhile, suppliers' delivery times lengthened substantially.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index™ (PMI®) remained above the 50.0 no-change mark in March, extending the current sequence of improving business conditions to nine months. That said, the PMI dropped to 51.2 from February's 54.3 and pointed to the least marked strengthening of operating conditions since last September.

A key feature of the March PMI survey was the impact of the war in the Middle East on inflation. An increase in the price of oil resulted in higher costs for freight, fuel and transportation. As a result, close to half of respondents recorded an increase in their input costs during March, with the pace of inflation the sharpest since April 2022.

With higher input costs often passed on to customers, output prices increased at one of the sharpest rates since the survey began in 2011. The pace of inflation seen in March was the steepest in just under 15 years. Sharply rising prices in the sector acted to limit demand.

Total new orders continued to rise as some firms reported that clients had purchased in advance to try to get ahead of price increases. The rate of expansion was only modest, however, and the weakest since last September.

Meanwhile, international demand suffered, with new export orders decreasing markedly following stable new business from abroad in February. In line with the picture for total new business, manufacturing production increased at a much-reduced pace during March.